Harvard's endowment surpasses $34 billion

Paced by Harvard University's staggering $34 billion stockpile, 76 colleges now boast endowments over $1 billion after robust returns on their investments over the past year, according to an annual study being released today.

Stanford University, Princeton University, and the University of Texas system rounded out the top five.

Among colleges with endowments greater than $1 billion, the median one-year return was 21 percent. Nationally, the median return was 17.2 percent, the highest since 1998.

"It was a very good year for endowments," said Jessica Shedd, director of research and policy analysis for the National Association of College and University Business Officers, which conducted the study.

The report, considered the most comprehensive survey of college endowments, surveyed 785 colleges and universities in the United States and Canada.

Over the past decade, college endowments showed an 8.6 percent rate of return, an important threshold in maintaining financial stability, Shedd said.

"That allows you to retain the purchasing power of the endowment."

She credited a strong stock market for fueling the endowment increases, pointing out that the S&P 500 index rose by more than 20 percent over the past fiscal year, which ended last June.

Other New England colleges that hold more than $1 billion in reserves include the Massachusetts Institute of Technology, whose endowment rose to nearly $10 billion; Dartmouth College at $3.7 billion; Williams College, which rose by almost 30 percent to nearly $1.9 billion; and Boston University, which topped the threshold at $1.1 billion, a 20 percent increase.

"We're certainly pleased with the rate of return," said Bill Lenhart, Williams's provost and treasurer.

Lenhart said the strong performance will help the college use the endowment to eliminate student loans from financial aid packages.

Tufts University, whose endowment fund grew more in fiscal year 2006 than any other major US college and university in the country, surged another 26 percent last fiscal year to $1.4 billion.

As endowments soar, the wealthiest colleges and universities are facing growing pressure from Congress to spend more of their savings to limit tuition increases and expand financial aid grants.

Some lawmakers have suggested requiring colleges to spend at least 5 percent of their endowments each year, as nonprofits are required to do.

Colleges have spent proportionately less of their endowment for each of the past four years and now spend 4.6 percenton average. Institutions with more than $1 billion spent 4.4 percent.

A number of elite universities have announced financial aid increases in recent months. In December, Harvard announced it would spend $120 million on financial aid next year, a $22 million increase. It also said it would require families earning $120,000 to $180,000 a year to pay no more than 10 percent of their income on average.

Earlier this month, Yale announced it would increase spending from its endowment by nearly 40 percent.

John Longbrake, a Harvard spokesman, said endowment spending financed almost one-third of Harvard's operating budget and financial aid programs.

But critics say colleges should spend far more of their fortunes to justify their tax-exempt status. Lynne Munson, an adjunct research fellow at the Center for College Affordability and Productivity who testified before Congress on the issue last fall, said Harvard could allow its students to attend for free for just $300 million, a fraction of last year's return.